India's GDP Likely To Grow At 6.5% In Q2FY25: SBI

India's GDP growth for the second quarter of the current fiscal year could be around 6.5 per cent, according to a report by the State Bank of India (SBI). While the report acknowledged a slight dip in growth for Q2, it noted that the slowdown might be temporary. It pointed to a recovery driven by increasing rural demand, which is seen as a sign of improved income levels.

"The Blip in Growth in Q2 might be an Impasse, tailwinds of recovery is now reinvigorated by a surge in rural demand... a proxy of better income levels," the report said. The report highlighted that a recovery was observed in October, suggesting that growth in the third and fourth quarters could bring the overall GDP growth for FY25 close to 7 per cent.

"We estimate Q2FY25 GDP growth around approx. 6.5 per cent,.... and, expected Q3 and Q4 growth numbers could push overall yearly GDP growth closer to 7 per cent in FY25." the report stated. The report however emphasised the need to capture "soft data" accurately to reflect changing consumer behaviours, especially as quick commerce (Qcommerce) gains traction in urban areas.

It also pointed out that rural demand has been robust, underpinned by high consumer sentiment. This positive sentiment indicates that government initiatives aimed at supporting the lower-income population are making an impact.

Over the first half of FY25, rural consumer sentiment has consistently remained above 100 and is gradually aligning with urban consumer sentiment levels. It said, “In all months of H1-FY25, rural consumer sentiment is more than 100 and gradually converging to that of urban consumer sentiment.”

The report, however, cautioned against any policy decisions that could create short-term fiscal pressures. It advised against initiatives like loan waivers and universal crop price guarantees, which it suggested are "unscientific" and could lead to long-term economic challenges.

"Policy mistakes promising undesirable short-term fiscal bonanza like loan waivers, unscientific and universal crop price guarantees should be avoided" the report noted. The report also highlighted that "higher consumer sentiment in rural areas has positive implications - as it will lead to higher consumer spending, thus supporting rural markets, job creation and income generation."

This upward trend in rural demand is expected to contribute to broader economic growth, helping India's GDP stay on track for a strong finish to FY25. (ANI)